Air NZ passes, can do better

The Market Surveillance Panel gives the airline a qualified clearance. Business editor JIM EAGLES reports.

The behaviour of Air New Zealand and the Government during the airline's financial crisis last year has been cleared by the stock exchange market surveillance panel.

But the panel also concluded that the issues raised - including public statements on Air NZ by cabinet ministers - should be considered by the exchange to see if the rules need changing.

And the airline will have to await the outcome of a wider investigation by the Securities Commission before it can feel entirely safe.

The market surveillance panel's report, issued yesterday, notes that there was some material which Air NZ might have disclosed to the NZSE but which it either kept quiet or revealed through the media.

However, it concludes that the airline "was conscious of and substantially complied with the requirements of the disclosure rules", and accordingly it "makes no formal finding of any breach".

Notwithstanding that, the panel has underlined its view that "at least as a matter of good practice" major speeches or media statements by listed companies should be made available to the stock exchange at the same time as they are released.

Chairman Bill Falconer said what happened was "not a breach but the practice could have been tighter".

The panel also rejected a complaint by Act MP - and former member - Stephen Franks that the Government was allowed to do due diligence on Air NZ without first signing a confidentiality deed as required by NZSE listing rules.

Mr Falconer said the committee had concluded that in this particular case there was no need to sign a confidentiality deed because there was no prospect of the Government actually trading in Air NZ shares.

Nevertheless, the decision states specifically that "generally, a due diligence ... will require a waiver from the NZSE and the potential buyer's stated disinterest in buying any shares ... will not avoid the need for such a waiver".

Mr Falconer said the point had been made to emphasise that this decision should not be taken as any sort of precedent on the requirement for confidentiality deeds.

"This particular ruling applies only to the particular case the panel had before it. It is for the panel to decide when the circumstances are such that a confidentiality deed is not necessary."

Other issues raised by Mr Franks, the panel concluded, involved corporate governance matters which did not fall within the scope of the disclosure rules.

"The panel does not have a general role of enforcing corporate law obligations."

The panel had some concern that some of the information provided to the New Zealand and Australian Governments under confidentiality was then made public by ministers.

Because the market was not aware of the full picture, this had caused some confusion, Mr Falconer said, and "Air NZ could perhaps have done more to put those statements in context".

It was "a delicate matter" and "not easy for a company to resolve".

Underpinning the panel's finding on those points is a ruling that the definition of "relevant information" which should be provided to the market need not apply to information which might not change the share price but which would give investors more certainty.

Recognising the significance of that stance, the panel has recommended the NZSE review the rules to see if the definition of "relevant information" should be wider.

Mr Falconer said that was because, while the panel believed there was no breach of the listing rules, "it seemed to us that things were going on which, while not price sensitive, were germane to how investors would view the company".



On another key point, the panel accepted Air NZ's explanation that as long as the deal for Singapore Airline's to recapitalise the airline was in place, there was no need to provide additional information to the market.

"It was," said Mr Falconer, "only when that didn't go ahead that things fell out of bed. That is the sort of dilemma which any company can face, and we did not feel Air NZ's actions were outside the rules."

The panel also accepted Air NZ's explanation that, while it did not announce the size of its $173 million operating loss until late in the piece, it had earlier warned of "a substantial operating loss" and reputable analysts had been forecasting the figure to be around $200 million.

The panel's stance was welcomed by Air NZ as recognising the practical difficulties companies sometimes faced in complying with the rules.

General counsel John Blair said that at the time the company faced a volatile situation, its directors were besieged by reporters and there were all sorts of speculative media comments.

"This creates difficulty or impossibility in complying with a requirement to first release relevant information through the stock exchange."

Mr Blair said the report would provide valuable guidance to companies and Air NZ supported the recommendation for a review of the disclosure rule.

Air NZ said the report was particularly timely because, like many other companies which now had a secondary listing on the Australian Stock Exchange, it would soon have to choose between delisting in Australia or taking a full listing.

Mr Blair said the board had yet to decide whether to take a full ASX listing. However, "the company will now actively consider implementation of a more formalised compliance management system based on market experience in Australia".

The report was criticised by Mr Franks, who said it had notably failed to deal with the issues he raised or reach clear conclusions.

"I can only assume that they were ducking and diving to avoid embarrassing the Government by having to rule that it and Air NZ broke the rules.

"But as someone very familiar with the rules, I have no doubt that they were broken."

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